Arion Bank hf. - Financial Statement Release

Arion Bank's H1 2013 financial results

Arion Bank reported net earnings of ISK 5.9 billion for the first half of 2013,
compared with ISK 11.2 billion for the same period in 2012.  Return on equity
was 8.9%, compared with 18.8% in the same period of 2012. Return on equity
based on regular operations was 8.1%, compared with 11.8% in the same period of
2012. Total assets amounted to ISK 929.0 billion, compared with ISK 900.7
billion at the end of 2012. 

Net earnings for the second quarter of 2013 amounted to ISK 4.5 billion,
compared with ISK 6.8 billion in the same period in 2012. Return on equity in
the second quarter was 13.5%, compared with 22.7% in the same period in 2012.
Return on equity based on regular operations in the second quarter was 9.9%,
compared with 11.4% in the same period of 2012. 

The Bank's capital ratio at the end of the period was 24.3%, the same figure as
at the end of 2012. 


Highlights of the interim financial statement:

  -- Net earnings of ISK 5.9 billion, compared with ISK 11.2 billion during the
     same period of 2012.
  -- Earnings during the second quarter of 2013 of ISK 4.5 billion, compared
     with ISK 6.8 billion during the same period in 2012.
  -- Earnings from regular operations of ISK 5.4 billion, compared with ISK 7.0
     billion during the same period of 2012.
  -- Operating income decreased between years to ISK 20.8 billion from ISK 24.9
     billion in the same period of 2012. The main reason for this is the
     decrease in the interest-rate differential related to an increase in term
     deposits, bond issues and lower valuation changes in the loan portfolio.
  -- Net interest income of ISK 12.7 billion, slightly lower than the same
     period in 2012 as a result of lower inflation.
  -- Net valuation change on loans of ISK 0.1 billion, mostly as a result of
     write-downs relating to court judgments on currency-linked loans and
     written off loans totalling ISK 6.8 billion and an increase in the
     valuation of loans, primarily to corporate clients, of ISK 6.7 billion.
  -- Return on equity was 8.9%, compared with 18.8% in the same period of 2012.
     Return on equity based on regular operations was 8.1%, compared with 11.8%
     in the same period of 2012.
  -- The interest-rate differential as a percentage of average interest-bearing
     assets was 3.1% during the period, compared with 3.4% during the same
     period of 2012.
  -- The cost-to-income ratio was 62.4%, compared with 52.0% during the same
     period of 2012. The high ratio is partly explained by provisions relating
     to the fine imposed on Valitor by the Competition Authority and lower
     operating income than in the same period of 2012. The cost-to-income ratio
     on regular operations was 60.3%, compared with 52.8% during the same period
     of 2012.
  -- Loans to customers of ISK 567.3 billion at the end of the period, which is
     virtually unchanged from the beginning of the year.
  -- Total assets of ISK 929.0 billion, compared with ISK 900.7 billion at the
     end of 2012.-- Shareholders' equity at the end of the period of ISK 136.8 billion,
     compared with ISK 130.9 billion at the end of 2012.



Höskuldur H. Ólafsson, CEO of Arion Bank:

“The Bank's second quarter financial results are in line with our expectations.
The Bank continues to consolidate its position, thanks to the improved quality
of the loan portfolio and greater diversity in the funding base, both areas on
which we have placed great emphasis recently. The Bank's capital ratio and
liquidity ratios remain robust. 

Despite the positive results in the second quarter, the six-month results are
clearly affected by the first quarter results which fell short of expectations,
largely as a result of unfavourable exchange rates and provisions made for a
one-off expense related to a subsidiary of the Bank. 

We have registered a 60% increase in demand for new loans in the first six
months of the year compared with last year, a pleasing development. As we
emerge from a period of economic stagnation, we would naturally like to see an
even greater growth in loans, but a change in demand does indicate more intense
economic activity. 

The Bank's operations continue to be fundamentally stable, although volatile
areas do remain in the Bank's external environment, such as the high costs
relating to court judgments on currency-linked loans this year just as in past
years. Nevertheless the impact of irregular items on the Bank's operations is
decreasing and we expect this trend to continue."



For further information please contact Haraldur Gudni Eidsson of Arion Bank's
Communications division at haraldur.eidsson@arionbanki.is, or tel. +354 856
7108.

Attachments:

Arion Banks Interim Consolidated Financial Statements 30.06.2013.pdf

Press Release - Arion Bank s Interim Consolidated Financial Statements H1 2013.pdf